May 25, 2018

Can Pre-Holiday Trade Push Corn to New Highs?

May 24th, 2018

Good Morning! From Allendale, Inc. with the early morning commentary for May 24, 2018.

Grain markets continue to grind higher on fund buying, technical buy stops and fundamental concerns that corn acres may be reduced because of wet conditions in northern IA and south-central MN. Corn and wheat are indicating over bought technical signals, however, trade will be preparing for their expectations of markets when we return from the holiday on Monday night.

US Dollar index remains strong and is now within striking distance of the highs made on November 7, 2017.

Weekly Export sales report will be released at 7:30 am. Trade is estimating old crop corn at 700,000 to 1,100,000 mt., new crop 100,000 to 250,000 mt., old crop soybeans -200,000 to 400,000 mt., new crop 200,000 to 400,000 mt., soymeal old crop 100,000 to 400,000 mt., soyoil 8,000 to 30,000 mt. and wheat old crop -100,000 to 100,000 mt. and new crop 100,000 to 400,000 mt.

Corn planting date of May 31 becomes extremely import as Minnesota farmers have to decide to plant corn or switch to soybeans.

USDA, on Tuesday will start the weekly crop ratings numbers. Allendale would expect a respectable number on Tuesday, in the 67% - 72% range, last year we started with 65% good/excellent.

Funds were estimated to have been net-buyers of 13,500 contracts of corn, 5,500 soybeans, 7,500 wheat, 2,500 soymeal and 2,000 soyoil on Wednesday.

Weekly ethanol production fell from 1.058 million barrels per day to 1.028 in the latest week. This was a bit disappointing to the trade. Production ran 1.8% over last year and year to date pace remains unchanged at 2.3% over last year. USDA’s whole-year goal in corn for ethanol is 2.3% over last year.

EIA crude oil stocks post unexpectedly significant increase vs trade expectations for a decline. Gasoline stocks also rise compared to expectations for decline while distillate stocks decline slightly.

Brazilian sugar producers and soybean processors say their operations have been affected by nationwide trucker’s protesting high diesel prices that entered a third day on Wednesday; protests are expected to continue today. Ports also have also been impacted, but loading operations continue if there are supplies in port silos.

Russian wheat production could drop to 70.0 mt. this year compared to USDA's last estimate of 72.0 mt. Dryness in the wheat producing areas combined with late planting in its northern region has some yield estimates dropping 25%.

Economic traders are watching the results of the jobless claims report and existing home sales today. Trade talks and tweets out of Washington will likely be attracting attention over the long weekend.

Cattle on Feed report will be released on Friday at 11:00 am. Trade average estimates for: On Feed 104.9%, Placed 90.9%, and Marketed 106.0% during April a year ago.

Packer activity has been quiet with a few early bids at 108 and offers at 115. None of the cattle offered on the Fed Cattle Exchange sold at yesterday’s auction. The early basis pricing by cattle feeders for late May and early June has packers accessing inventory and not having to chase for numbers. However, profit margins are at historical highs for packers therefore they will want to keep chains running at capacity.

Product values continue to slide as supplies increase and demand slows down after the Memorial Holiday. Beef demand has seen good demand at retailers as prices are competitive with pork.

June live cattle closed above the 20-dy and 50-day moving averages on Wednesday projecting the next resistance at 108.00. Support comes in at 103.80.

Hog prices historically consolidate ahead of the holiday then begin a seasonal rally in early June. The premium of futures to cash index on must wonder how much of rally potential is already in the market.

June lean hog futures trading continues to become narrower. Resistance is 76.50 and support 72.50. The long-term down trend crosses at the resistance level which a close above that level could trigger buying interest.

Dressed beef values were mixed with choice up .73 and select down .82. The CME Feeder Index is 133.63. Pork cutout value is down 1.33.

Technical Chart of the Day

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